Take Sajid Javid's comments on IR35 UK contractor rules with a bucket of salt, warns tax guru Conservative Party claims they may review the extension of IR35 tax rules to the UK private sector have been called into question by a tax expert. Would-be Chancellor of the Exchequer Sajid Javid promised a review of the changes last week, in line with other parties. But observers have noted that there is no mention of this in …
Thats exactly the point.
Someone mentioned that a a small % income tax rise on, say apple, or anyone of the big players, would dwarf anything from a few contractors.
I guess the gubberment are utter scaredy-pants in the face of big business.
They are weak and pathetic.
Far easier to beat-up on the little man.
The party of business - my not-as-fat-as-yours ass.
@AC
Why would we want them to raise tax? Not just against big business but anyway? The gov isnt better at spending the money than the people, hell the gov gets railed for wasting it or spaffing on mates. Taxation in this country is pretty high already.
I was agreeing with Paul Crawford that the gov will screw everyone but their mates. But mentioning that it applies to all the parties.
Not exactly. The ministerial position he filled did that, as it had to in order to comply with the law. Any other minister would have been compelled - in the courts, if necessary - to do the same thing, because LCC's decision was totally unlawful (and IMO a pretty blatant attempt to duck responsibility for approving fracking).
Whether you approve of fracking, or oppose it because you hate poor people getting rich, this country doesn't have any legal mechanism for blanket-denying planning permission to a process.
"you approve of fracking" and "you oppose it because you hate poor people getting rich"
Do you mean "you approve of fracking because you love poor people getting rich"? as a term of equal meaning and weight?
Could it be "you approve of fracking because you don't care about destabilising the land and the people's houses and businesses on it" and "you oppose it because you do care about destablising etc etc" could also be a possibility?
Or you might think that fracking will not make poor people rich, but oil companies rich?
The way you set it up is a classic example of begging the question, that is, loading the terms so that you force the answer.
You expect politicians to tell the truth on IR35 rather than saying what people want to hear during an election?
We can't even get:
- Boris Johnson to say how many kids he has
- Jeremy Corbyn to provide a believable answer on when he watched the Queens speech last Christmas
- Jo Swinson on anything about the environment
Arguably that makes the LibDems the best option as at least they only lie about their policies...
A shadow minister(?) said that. However, he then backtracked later and said they were just going to review it, not commit to scrapping it.
IMHO we've heard all this before. None of them are going to cancel, delay or amend the reforms. Contractors are easy targets, both in terms of public opinion and lack of resources to lobby or fight. We'll be screwed over, any market making significant use of contractors will face massive disruption, but HMRC will count it as a success even when tax receipts drop significantly. Everyone involved will lose out, but the government will fudge the figures to try to prove they haven't.
It is avoidance. The problem is that "avoidance" is being conflated with "evasion", where the former is not paying taxes you don't owe, while the latter is not paying taxes you do owe.
I pay the tax I owe. I avoid paying capital gains, for instance, by not being an investment bank or trading stocks and shares. I avoid paying inheritance tax by not inheriting anything from my still living parents. I avoid paying the car tax for three cars by having just one car.
This is what keeps annoying me about this whole thing: confusion of terms. Contractors only pay the tax that they legally owe, and for some reason this has become a bad thing.
I think the difference comes down to impressions.
A person would not consider someone a tax avoider for not paying car tax on a car they don't own, but they might consider it avoidance not paying any tax because you have a Plugin Hybrid, even though you never plug it in and there are no emissions benefits when running it on petrol alone.
Tax avoidance is usually used to mean someone who doesn't pay tax which they don't owe but people think they should owe. This is why I put 'tax avoidance' in quotes, because I don't consider it tax avoidance, I consider it paying the correct amount of tax.
It's also why the rules and reforms here bother me. It's nothing to do with paying more tax. It's the fact that, as there are a set of rules specifically targeting contractors, the govt and those who support the rules believe we are avoiding paying tax which we should owe, even though we don't owe it. It says that they believe we are doing something unethical, when I pride myself on being a good and ethical person.
I would be perfectly happy if the govt decided to increase CT and/or the dividend tax. I would continue to pay what I owe. I will never be happy, though, with rules aimed specifically at me and my compatriots which attempt to class us as "tax dodgers", and even less so with rules which look like they could completely destroy the contractor industry.
I don't understand why they think IR35 is a good way of making contractors pay more tax. It's complicated, vague and full of loopholes. They should have just created a rule along the lines of "companies with 5 or fewer shareholders may only pay out 25% of profit as dividend" or somesuch. Same effect, no getting around it, no nonsense about "personal service companies" and "deemed payments".
Yep. Also in the running:
- increase the dividend tax
- replace shareholders with employees in your suggestion
- bring in a rule saying that any dividend paid to a director or employee must be run through PAYE as if salary (with a credit for corporation tax already paid)
All of these are simpler and fairer than IR35, while having the same or very similar effect on tax revenues.
Hmm. You left a loophole or two there.
E.g., year 3: My company, having paid 25% of its profits from years 1 and 2 as dividends, has a sizeable cash balance.
Another company, which just happens to be entirely owned by me, buys my company for its assets. It can afford to do this because it's borrowed enough money to cover the purchase price from me.
I now have 75% of my company's profits returned to me as a cash sale of shares, on which I pay a mere 28% CGT (and even that only after deductions) and, better yet, I now work for the other company which pays me 25% of its profits in dividends, but also pays me a handsome tax free loan repayment for a couple of years.
Don't worry, if you close that loophole I can find another. And another. And ano.. well, we'll get back to where we are now. How do you think we got here?
Unfortunately it is not really about the 'contractors' in an IT sense. IR35 was introduced into law in 2000 by Gordon Brown to counter 'tax avoidance' by the use of so-called "personal service companies", specifically highly paid BBC presenters who were advised by the BBC to use PSC. It is alleged that this was to help the BBC avoid paying the Employer NIC contribution on their earnings.
By the way, there is still no definition in HMRC of what a PSC actually is - one of the many problems of this incredibly badly thought out 'tax and grab' legislation.
"taxed to death" - tax never killed anyone. Whereas the squeeze on government funding caused by us collectively as a society not paying enough tax is killing quite a lot of people. I'm pretty well off, I pay a lot of tax, and I don't begrudge any of it. I'd be happy to see taxes rise if it meant a better NHS, better schools, fewer homeless, more social housing. My life is improved more by seeing fewer beggars on the street than it would be by having a bigger car. Get over yourself.
I agree with the sentiments of your comment, however:
"tax never killed anyone"
The Loan Charge is a tax and has caused 7 suicides so far.
While I believe the loan schemes were highly unethical, and I advised my father to avoid them like the plague*, they were "sold" by experienced tax advisors and legal experts on the basis that they were legal. While strictly, the way the regs are worded, the loan charge does not count as retrospective taxation, the effect is to raise extra tax on cases which should be settled. This is at least as unethical as the schemes themselves.
The stupid thing is that there were already ways to deal with this in the tax code, by means of investigations and anti-avoidance rules. The loan charge is just a way for HMRC to avoid doing any work, avoid scrutiny for their failures in investigating this in the past, and to open up years which should have been closed already.
* I wasn't contracting at the time but he was and nearly joined such a scheme. He's very glad he listened to me now...
Fuss about which party may or may not have lied more in the regular run of the mill way is really just a way to distract attention from the fact that the Labour party is fundamentally antisemitic. The Jewish community has begged the rest of the country not to vote Labour, because a vote for Labour is a vote for antisemitism.
This is not a normal election, and in future decades we will look back and see who recognised the monster and stood up to it. Those who didn't are going to find it very hard to claim they are not racist.
Boris is awful, but he's going to win because Corbyn is a lifelong antisemite with decades of payments from racists in his bank accounts.
"Not everyone in the Jewish community believes that."
But is that from the actual UK Jewish community or the made up letter "Jewish representatives" sent to The Canary and The Sqwawkbox?
http://david-collier.com/letter-orthodox-rabbi/
For the larger question of anti-semitism, the wording is key. The majority of the Labour party are not anti-Semitic. Some members of the Labour party are anti-Semitic based on what they have said. The Labour party has failed to adequately investigate many of the reported offences, some of those found guilty have been kicked out and subsequently re-admitted and others have had cases dropped with no punishment or explanation for why the cases were dropped.
Actions speak louder than words.
There is so much wrong with that comment that it's hard to know where to begin. Simpler to identify the only reasonable, honest and factual elements. i.e.
"This is not a normal election"
and
"Boris is awful"
The rest is just unsubstantiated and refutable bollocks.
Unfortunately JR-M doesn't believe in decimalisation*, so instead you just get a thrupney bit
* (Although it happened when he was three. Did you know that he's actually younger then Kylie Minogue? Bare that in mind next time he's doing his 'more Edwardian than thou' routine.)
If you look at a large group of people you will find a diversity of opinions many of which you disagree with. Some will be anti-: semitic, muslim, gypsy/roma, black/brown/yellow/white/... gay, men/women, ...
Just because the large group are all members of XXX does not mean that XXX is institutionally anti-YYY. But what does seem to happen is that if group YYY is well organised they can make sufficient waves in the media for some to believe that XXX is anti-YYYist.
So: be slow to believe what you read, try to learn what is really happening.
And if group XXX is accused of anti-semitism and cases are passed to said parties complaints team, who investigate and then either eject the member only for them to reappear a few months later saying much the same thing (Chris Williamson etc) or the investigation drags on for more than a year with no action being taken.
While I have no doubt that racism exists in any large political party, how the party handles those people when clear cases emerge of unacceptable behaviour is how the party ends up being judged.
In Labours case, I believe the issue is rooted in painting one side as good and the other side as bad - once you do that, any abuse, however vile, of the bad side is tolerated because you are on the good side. What began as Palestine (good) vs Israel (bad) has crossed from positive action and intellectual debate to something else.
No. The "Jewish Community" has not done that. The current Chief Rabbi has done that. He does not speak for "the Jewish community" - he only claims to. He speaks for part of it. There are a lot of other parts of the "Jewish Community" with quite different ideas. Perhaps you should get out from under your rock and meet a few.
Rabbi Mirvis has shown from the outset that he's an open supporter of the Tories, and is willing to wade into election discussions on their behalf. His predecessor, Rabbi Sachs, had quite different ideas.
You realise the Tories lovingly put up a statue of famed Anti Semite Nancy Astor recently (plenty of pics online of Johnson there with a big grin)
Yes, she was "a long time ago" / past is a different country etc. - but when statue celebrated, none of the Tories made any reference to her nasty beliefs, made comments about her obviously being of her time and holding views that are unacceptable today, instead just a big celebration with no wider pictutre comments
I can already announce the result of the reviews. Same as every other time IPSE, Contractor Calculator et al have called out HMRC on IR35. We've reviewed it, we're doing it right and the changes will proceed. Lather, rinse, repeat.
Doesn't matter which party or parties are in power, because HMRC are convinced they are right and will continue to say that to the Government.
Actually, IR35 is the manifestation of an HMG Treasury policy. HMRC are just there to try to implement it.
Of course, when handed an poorly thought out tax change and told to make it work, the solution that they've come up with has so many barely papered over cracks which have more paper over them to make it seem coherent that to the people it affects, it just looks hopeless and unjust.
This latest change just alters who HMRC can threaten with FUD. Clients have more to lose, so are less likely to challenge the policy.
But, the Government makes the laws, so we are pretty helpless to push back.
HMRC say they can add £xB to the coffers by fixing tax 'avoidance', no minister is going so say no to that.
Big companies stop engaging contractors, bring in more people from offshore to fill the gap.
Some time later, none of the promised income appears, more local people are out of work and money goes to offshore companies.
Obviously it will be claimed to be a massive success.
"an uncosted pledge that would leave a multibillion-pound hole in accounts should the party remain in power after the UK general election"
Or perhaps they don't want to publish the true situation that the net tax take to HMRC is almost identical before and after IR35. What they gain in NI from "disguised employees" they lose in VAT and Corporation Tax. The figures published attempting to justify IR35 only show one side, they don't take account of loss of any other source of tax.
Stop tying to derail the arguments with facts please. No-one likes that.
But you are right. I did a comparison on what I've paid in total taxes over the last couple of years against what I used to pay when I was at an umbrella company, and the difference if I have to go back to an umbrella or permie will be a net loss to HMRC of about £20k per year.
Shirley, you mean the "Conservative Party lies and misinformation office"?
The Election Flying from the Conservatives that came through my letterbox read like the 'Arnie does it best' clippings Rimmer had on his wall in Red Dwarf.
i.e, lots of headlines that don't mean what they're being sold to mean.
And this plopped through the letterbox a week after the BBC complaint.
"The Election Flying from the Conservatives that came through my letterbox read like the 'Arnie does it best' clippings Rimmer had on his wall in Red Dwarf"
Yes I've been lucky enough to have been leafleted by the three main parties - they all manage to seem equally awful but in completely different ways.
They foolishly appear to think that the bollocks they print in these things will affect my vote - I'm afraid that will be decided by whose leaflet is gentler on the derrière when I wipe my arse with them...
My own organisation is already spending a lot of time and money trying to sort out the IR35 question for our many, many contractors. We've only got until April 4 to have everything in place for the new regime. This includes making people offers to become perm, renegotiating contracts, negotiating with Agencies, and recruiting replacements for those we might lose as part of the above.
We can't afford to wait now for any "reviews". If whoever wins the election declares a hold on the implementation for a defined length of time, that will be fine, and we'll put this on hold. However, if they just announce a "review", then we are just going to continue the process, and a lot of the contractors are going to be out of the door.
"...already seeing banks and other major companies panic-scrapping their contractors"
Having seen this first hand (I'm back-filling for a contractor who was benched purely for IR35 reason) the knock-on effects are extremely concerning, as there simply wasn't enough time to determine which contractors might not come back without costing businesses a LOT more to balance their books. Crazy move that will cost more in the long run.
Is lying through [well... you know where the sun don't shine].
They'll do what HMRC tell them to do. Politicians of different flavours/parties come and go but the Civil Service goes on forever.
HMRC will lie and tell whichever MP is in the Chancellors Hot Seat and promise loads of filthy lucre for going after contractors with IR35.
Meanwhile, the HMRC top honchos will be feathering their platinum plated pensions and heading off to Little Britain (Dordogne on Sea)
Cyncial?
You betcha.
"Contractors earning good money and worried about paying too much tax"
I'll start by pointing out that I'm no fan of Corbyn or Labour, this is no defence of them or their policies.
However, there is a big difference between "paying too much tax" and "paying more tax".
As I've stated elsewhere, my greatest objection to IR35 is that it penalises contractors, and only contractors. A director/owner of a private Ltd is entitled to set his own salary and to declare whatever proportion of the companies profits he wishes as dividends. Being declared inside IR35 is basically saying "Yeah, but you're not a director/owner of an Ltd, you're just saying that to avoid paying tax". It would be calling me a liar (and couldn't be further from the truth in most cases I know of).
I would be happy with an increase to CT and/or dividends tax, limits to the amount of profit which can be declared as dividends, or even rules which force dividends paid to employees/directors to be run through PAYE as salary, as long as they applied across the board and did not call me a liar or a tax dodger.
On top of this, the way many clients are handling this will force all contractors to pay too much tax (i.e. more tax than they should owe) by banning Ltd contractors or declaring them all "inside" even when they are clearly outside.
So, no, I don't want to pay "too much tax" (more tax than I owe based on my circumstances), but I'm fine paying more tax.
I am a Contractor - and I did have a 3 year contract extension starting in January which was worth £750,000.
Now that Contract has been binned - due to the client's fears over IR35. They are binning ALL UK Contractors as a matter of policy.
So HMRC will get zero tax - and the Economy will not get the benefit of my spending whatever would have been left over from that £750,000 after tax.
So how exactly is this a benefit?
Plus the Company in question (A large Multi-National) will not be able to replace me* - as I have a fairly unusual skill set. So they will suffer too.
* They have been looking for the past 18 months for someone to back me up (or replace me) - but have not found a single candidate.
Ho Hummm. Early retirement it is then.
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